This document discusses business ethics and provides an overview of its importance and development over time. It covers several key points: 1) Business ethics is crucial for decision making at all levels of an organization and deals with determining what practices are acceptable. However, there is no single approach for resolving ethical issues. 2) Studying business ethics is important because scrutiny of business decisions has increased, trust in businesses has diminished after financial crises, and stakeholders influence what is considered ethical. 3) The study and practice of business ethics has evolved over the decades as issues like the environment, consumer protection, and financial misconduct have risen up. Regulations have also increased to codify ethical standards and compliance.

1. © 2013 Cengage Learning. All Rights Reserved. 1
Dr. Jingjing Weng
College of Management
Yuan Ze University
Business Ethics in a Global
Economy

2. Recommended text book
Ethical Decision Making for Business: A
Managerial Approach (9th edition)
Fraedrich, Ferrell and Ferrel (2013).
International Edition.
華泰文化
© 2013 Cengage Learning. All Rights Reserved. 2

3. Business Ethics
Ethics is a part of decision making at all
levels of work and management
 Just as important as functional areas of
business
 Deals with questions of whether practices are
acceptable
 No universally accepted approach for resolving
issues
© 2013 Cengage Learning. All Rights Reserved. 3

4. Why Study Business Ethics?
• Business decisions under great scrutiny
• Global financial crisis created diminished
stakeholder trust
• Deals with questions about whether practices
are acceptable
• No universally-accepted approach for resolving
issues
© 2013 Cengage Learning. All Rights Reserved. 4

5. Why Study Business Ethics?
• Reports of unethical behavior are on the rise
• Society’s evaluation of right or wrong affects its
ability to achieve its business goals
• Studying business ethics is a response to
government policies and stakeholder demands
for ethics initiatives
• Individual ethics alone is not sufficient
• Studying business ethics helps identify ethical
issues to key stakeholders
© 2013 Cengage Learning. All Rights Reserved. 5

6. Business Ethics Defined
Comprises principles, values, and standards
that guide behavior in the world of business
 Ethical decisions occur when accepted rules no
longer serve and decision makers must weigh
values and reach a judgment
 Values and judgments are critical in ethical decisions
Principles: Specific boundaries for behavior
that are universal and absolute
• Freedom of speech, civil liberties
Values: Used to develop socially enforced
norms
• Integrity, accountability, trust
© 2013 Cengage Learning. All Rights Reserved . 6

7. A Crisis in Business Ethics
Nearly half of employees observe misconduct in
the workplace
 After the financial crisis, business decisions and
activities have come under scrutiny
 The financial sector has not regained stakeholder trust
• Consumer trust of businesses is declining
• No sector is exempt from ethical misconduct
• Stakeholders determine what is ethical/unethical
• Investors
• Employees
• Customers
• Interest groups
• Legal system
• Community
© 2013 Cengage Learning. All Rights Reserved. 7

8. © 2013 Cengage Learning. All Rights Reserved. 8
Specific Issues
 Misuse of company resources
 Abusive behavior
 Harassment
 Accounting fraud
 Conflicts of interest
 Defective products
 Bribery
 Employee theft

9. © 2013 Cengage Learning. All Rights Reserved 9
Americans’ Trust in Business Sectors
(% of respondents who say they trust the following business
categories)

10. © 2013 Cengage Learning. All Rights Reserved. 10
The Reasons for Studying Business Ethics
 Having good individual values/morals is not
enough to stop ethical misconduct
 Ethics training helps provide collective
agreement in diverse organizations
 Business ethics decisions can be complicated
 Studying business ethics helps identify ethical
issues to key stakeholders

11. © 2013 Cengage Learning. All Rights Reserved. 11
Source: Adapted from “Business
A Timeline of Ethical and Socially
Responsible Concerns
1960s 1970s 1980s 1990s 2000s
Environmental
issues
Employee
militancy
Bribes and
illegal
contracting
prices
Sweatshops and unsafe
working conditions in
third-world countries
Cybercrime
Civil rights
issues
Human rights
issues
Influence
peddling
Rising corporate liability
for persona damages
(for example, cigarette
companies)
Financial
misconduct
Increasing
employee-
employer
tension
Covering up
rather than
correcting
issues
Deceptive
advertising
Financial
mismanagement and
fraud
Global issues,
Chinese product
safety
Changing work
ethic
Disadvantaged
consumers
Financial fraud
(for example,
savings and
loan scandal)
Organizational ethical
misconduct
Sustainability
Rising drug use Transparency
issues
Intellectual
property theft
Ethics Timeline,” Ethics Resource Center, http://www.ethics.org/resources/business-ethics-timeline.asp (accessed May 27, 2009). Copyright ©
2006, Ethics Resource Center (ERC). Used with permission of the ERC, 1747 Pennsylvania Ave. N.W., Suite 400, Washington, DC, 2006, www.ethics.org.

12. Before 1960: Ethics in Business
Theological discussions of ethics emerged
 Catholic social ethics included a concern for
morality in business, workers’ rights, and living
wages
 Protestants developed ethics courses in their
seminaries and theology schools
 The Protestant work ethic encouraged hard work
© 2013 Cengage Learning. All Rights Reserved. 12

13. The 1960s: The Rise of Social Issues
in Business
Social consciousness emerged
 Increased anti-business sentiment
 JFK’s Consumer Bill of Rights— a new era of
consumerism
 Right to safety, to be informed, to choose, and to
be heard
 Consumer protection groups fought for
legislation changes
 Ralph Nader
© 2013 Cengage Learning. All Rights Reserved. 13

14. The 1970s: Business Ethics as an
Emerging Field
Business professors began to write about
social responsibility
 An organization’s obligation to maximize
positive impact and minimize negative impact
on stakeholders
• Philosophers involved
• Businesses concerned with public image
• Conferences held and centers developed
• Issues:
Bribery Deceptive advertising
Price collusion Product safety
Environment
© 2013 Cengage Learning. All Rights Reserved 14

15. The 1980s: Consolidation
Increased membership in business ethics
organizations
 Ethics centers provided publications, courses,
conferences, and seminars
 Firms established ethics committees
 Defense Industry Initiative on Business Ethics
and Conduct (DII)
 The foundation for the Federal Sentencing
Guidelines for Organizations
 Corporate support for ethics
© 2013 Cengage Learning. All Rights Reserved . 15

16. The 1990s: Institutionalization of
Business Ethics
Continued support for self-regulation,
deregulation, and free trade
 Health-related issues more regulated
 The Federal Sentencing Guidelines for
Organizations (FSGO) in 1991
 Set tone for compliance
 Preventative actions against misconduct
 A company could avoid/minimize potential
penalties
© 2013 Cengage Learning. All Rights Reserved. 16

17. The Federal Sentencing Guidelines
for Organizations
Standards and procedures for preventing
misconduct
 High level of oversight
 Care in delegation of authority
 Effective communication
 Employee training
 Systems to monitor, audit, and report
misconduct
 Consistent enforcement and continuous
improvement
© 2013 Cengage Learning. All Rights Reserved. 17

18. The 21st Century: A New Focus
Continued issues with corporate non-compliance
 Public/political demand for improved ethical standards
 Sarbanes-Oxley Act (2002)
 Most extensive ethics reform
 Increased accounting regulations
 FSGO reforms (2004, 2008, 2010)
 Requires governing authorities to be informed of business
ethics programs
 Dodd-Frank Wall Street Reform and Consumer
Protection Act (2009)
 Aimed at making the financial industry more
transparent/responsible
A firm’s greatest danger is not discovering
misconduct early
© 2013 Cengage Learning. All Rights Reserved 18

19. Organizational Ethical Culture
Ethical culture: The component of
corporate culture that captures the values
and norms that an organization defines as
appropriate
 Creates shared values
Goal is to:
 Minimize need for enforced compliance
 Maximize utilization of principles/ethical reasoning
© 2013 Cengage Learning. All Rights Reserved. 19

20. Global Ethical Culture
Nations working together to establish
standards of ethical behavior
 NAFTA
 MERCOSUR
 WTO
 Companies can demonstrate their
commitment to social responsibility through
adopting international standards
 Global Sullivan Principles
 Coalition for Environmentally Responsible Economies
(CERES)
 United Nations Global Compact
© 2013 Cengage Learning. All Rights Reserved. 20

21. © 2013 Cengage Learning. All Rights Reserved. 21
Source: Adapted from “Business
The Role of Organizational Ethics in
Performance

22. Ethics Contributes to Employee
Commitment
Commitment comes from employees who
are invested in the organization
 Employees willing to make personal sacrifices
for the organization
 The more company dedication to ethics, the
greater the employee dedication
 Concerns include a safe work environment,
competitive salaries and benefits packages, and
fulfillment of contractual obligations
© 2013 Cengage Learning. All Rights Reserved. 22

23. Ethics Contributes to Investor
Loyalty
Companies perceived by their employees as
being honest are more profitable
 Ethical climates in organizations provide a
platform for
 Efficiency
 Productivity
 Profitability
© 2013 Cengage Learning. All Rights Reserved. 23

24. Ethics Contributes to Customer
Satisfaction
Consumers respond positively to socially
concerned businesses
 Being good can be profitable
 Customer satisfaction dictates business success
 A strong organizational ethical climate places
customers’ interests first
 Research shows a strong relationship between
ethical behavior and customer satisfaction
© 2013 Cengage Learning. All Rights Reserved. 24

25. Ethics Contributes to Profits
 Corporate concern for ethical planning is being
integrated with strategic planning
 Maximizes profitability
 Corporate citizenship is positively associated
with
 Return on investment and assets
 Sales growth
 Studies have found a positive relationship
between corporate citizenship and
performance
© 2013 Cengage Learning. All Rights Reserved. 25

26. Guest Lecture (Mar. 20)
 Ethics in global finance: Emerging trends in
times of crisis
 Time: 3/20 (Wed) 12:00-14:00
 Place: R70304
 Speaker: Eddy S. Fang, PhD (Cambridge)
Lecturer in Economics, Business School, Xi’an
Jiaotong -- Liverpool University
 Preparation before the lecture: reading case 9
(pp214) of the textbook
© 2013 Cengage Learning. All Rights Reserved. 26

27. Class Discussion today
Harvard University’s Justice with Michael Sandel
http://www.justiceharvard.org/about/course/
The moral side of murder?
http://www.youtube.com/watch?v=Y4HqXP47lPQ
&feature=related
Weekly news sharing from next week!!
(International news or news related to business
ethics)
© 2013 Cengage Learning. All Rights Reserved. 27